Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Cyril Tuohy
Despite a drop in annuities sales as part of the company’s strategy to adjust its risk exposures, MetLife’s top executive said the company remains committed to the annuities business.
MetLife pulled back on the sale of annuities in recent years, falling to the No. 8 spot at the end of last year from the No. 3 spot in 2012, according to Morningstar data. In December, the company said it would pare back the sale of variable annuities (VA).
In a conference call with analysts, Steve Kandarian, chairman, president and chief executive officer of MetLife, said the company is “in a position to pursue sales growth” after altering its mix of products to achieve “a more attractive risk return profile.”
“We remain committed to the annuity business as we see a substantial retirement savings opportunity in the United States,” Kandarian said.
MetLife reported first quarter net income of $1.3 billion, an increase of 36 percent from a year ago. Per share net income was $1.14, the company also reported.
First quarter operating earnings were $1.6 billion, down 4 percent from the year-ago period, MetLife also said.
In the annuities segment, the company reported operating earnings of $368 million, down 1 percent compared to the fourth quarter of 2013.
MetLife’s new VA sales plunged to $10.64 billion last year from $17.69 billion in 2012, Morningstar data indicate. The sales decline cost the company 5.5 percentage points in market share over the 12-month period.
Further declines in VA sales are expected this year.
“Since 2012 we’re focused on rightsizing our variable annuity business to achieve an appropriate risk profile,” Kandarian said. “Consistent with the December outlook call, we anticipate that variable annuity sales would decline this year.”
Bill Wheeler, MetLife’s president of the Americas, said the company would pursue a strategy of selling a broader array of VAs.
Living benefit riders have been a draw for annuitants, but companies have trimmed those benefits in the wake of the financial crisis and persistent low interest rates. Tax advantages and other benefits have instead become the draw.
The plan is to “really to pursue all of those avenues,” Wheeler said.
In response to an analyst’s question about VA growth projections, Wheeler said it was reasonable to expect growth in the low or mid-single digits.
“I don’t see this as being a double-digit grower,” Wheeler said. “Obviously, it somewhat depends on what’s going on with the capital markets. But assuming those are benign, I don’t expect it to be a double-digit grower.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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